Payments: How the West will end up copying the East

Many industry players agree that the pinnacle of the personal banking experience is China, where consumers are offered some very targeted and intelligent financial services. But it’s not the banks that have taken the lead here but companies such as Alibaba, which Pascale Brien, senior policy adviser, payments and digital at the European Banking Federation (EBF), describes as “an elephant in the room”. Chinese companies, she says, could come to dominate the payments market in Europe much as US card processors dominated the payments card market.

Zennon Kapron, managing director of Shanghai-based consultancy Kapronasia, explains that leveraging payments, WeChat and Alipay have created platforms that provide a wide range of products and services for consumers. Alipay (which is operated by Alibaba subsidiary Ant Financial) describes its application as a “global lifestyle superapp”, used by more than 5% of the world’s population. Enter “What is Alipay” on a search engine and watch the video – and you’ll understand why it’s called a global lifestyle superapp.

Alipay processes 170 million transactions per day and 800 million people use the WeChat application at least monthly. Mobile phones are low cost but very functional and China’s 4G network serves 70% of the population.

While European banks and those elsewhere are only beginning to understand how data can be leveraged to offer more personalised payments and banking experiences, the big trend in China is towards “situational finance”, says Kapron. Situational finance provides “any financial product a consumer needs at the time they need it and how they want it”. Kapron warns that the payments relationship in this scenario is moving away from the banks.

Using data from multiple products and services, companies such as Alipay and WeChat have expanded into newer product areas. Chinese consumers are happy to have their search data used, for example, if it results in a product that meets a need. The focus for Alipay, says Jeff Hu, London-based product manager at Alipay EMEA, is always on the whole payment cycle and filling the needs of consumers and merchants. Hu is based in London, working with merchants to ensure that Alipay users can have the same experience when holidaying as they do at home. Ultimately, Alipay will look to roll out solutions to UK-based consumers.

“Alipay’s starting point back in 2004 was addressing the burning issue of Chinese consumers in shopping online,” he says. “There was little trust in e-commerce and the payments were based on escrow accounts.” The same idea has carried through to products such as the Yu’ebao investment application that addressed gaps in bank-provided investment products.

China is often characterised by Western mainstream media outlets as a country that copies all the best ideas from the West. Interestingly, this isn’t a new idea and has been touted since the days of Marco Polo. In the 21st century financial services world, Western banks and fintech are likely to be copying China.

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